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Technology Stocks : Texas Instruments - Good buy now or should we wait? -- Ignore unavailable to you. Want to Upgrade?

To: B.REVERE who wrote (2407)	12/11/1997 9:50:00 AM
From: Charlie Smith	Respond to of 6180

Bruce: Well run companies with needed products and solid prospects (my four favorites in the tech arena today are TXN, XLNX, ADPT and CKFR) represent the best mode of compounding wealth available to investors. Every few years, broader market turmoil presents opportunities to accumulate shares of such companies at favorable prices. Never invest funds you will need within 3 YEARS for living expenses. Keep a cash reserve equal to 8 to 10 percent of your portfolio for the unexpected. So much for philosophy. As for today's markets, 1998 earnings are being reevaluated downward. My guess is that S&P 500 earnings growth for next year will come in at 5 percent or so, well below current consensus of 10 percent or higher. Contrary to pundit opinion, the risk in this market was always on the earnings side, not higher inflation. Five percent earnings growth next year, assuming interest rates decline to the 5.5 percent range during the year, gives a fair value on the S&P 500 of about 900. As we continue to import deflation from the far east, there are two major risks, in my opinion. First, the political will may not exist in the Asian countries to make the structural changes necessary to transition to capitalistic MARKET economies from capitalistic PLANNED economies. This would simply drag out the pain. Second, trade issues in the U.S. will come to the fore as our deficit soars. Politicians may try to take political advantage of this, to the detriment of the U.S. economy. Policy mistakes akin to 1930s trade actions could be made. I put a fairly high probability on the first of these risks (4 in 10), and a lower probability on the second (3 in 10). The world is now so tightly interconnected financially and technologically that no government can afford to commit blatant policy errors because the market response (crushing the currency) is instantaneous. That said, a weakening dollar relative to the rest of the world might not be a bad thing today. Hope this helps. Charlie